Skip to content


Union of India (Uoi) Vs. the Commercial Tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 2220 (W) of 1978
Judge
Reported in[1982]51STC310(Cal)
AppellantUnion of India (Uoi)
RespondentThe Commercial Tax Officer and anr.
Appellant AdvocateDebesh Mukherjee, Adv.
Respondent AdvocateS.N. Dutt, Adv.
Cases ReferredDebendra Chandra Das v. Commercial Tax Officer
Excerpt:
- ganendra narayan ray, j.1. this rule is directed against the assessment order dated 12th february, 1972, for the period from 1st april, 1967, to 31st march, 1968, under the bengal finance (sales tax) act, 1941 and the demand notice dated 25th february, 1972, issued by the commercial tax officer, shyambazar charge. the petitioner also prays for appropriate writ or writs directing the respondents to recall, rescind and/or withdraw the registration certificate no. 964a h.c. central dated 13th september, 1962, as referred to in the writ petition. the petitioner, namely, the union of india through the general manager, gun and shell factory, cossipore, calcutta, contends that the said gun and shell factory is owned and controlled by the government of india, ministry of defence and the said.....
Judgment:

Ganendra Narayan Ray, J.

1. This rule is directed against the assessment order dated 12th February, 1972, for the period from 1st April, 1967, to 31st March, 1968, under the Bengal Finance (Sales Tax) Act, 1941 and the demand notice dated 25th February, 1972, issued by the Commercial Tax Officer, Shyambazar Charge. The petitioner also prays for appropriate writ or writs directing the respondents to recall, rescind and/or withdraw the registration certificate No. 964A H.C. Central dated 13th September, 1962, as referred to in the writ petition. The petitioner, namely, the Union of India through the General Manager, Gun and Shell Factory, Cossipore, Calcutta, contends that the said Gun and Shell Factory is owned and controlled by the Government of India, Ministry of Defence and the said factory manufactures items of defence services principally, but occasionally the factory also manufactures goods required by the Central Government departments. State Government departments and various undertakings, projects and/or institutions of the Central and State Governments and very occasionally to some of the private concerns as and when directed by the State or the Central Government authorities. It is contested by the petitioner that such manufacture and/or supply of goods to different other institutions and Government undertakings is done only to absorb surplus capacity of the said Gun and Shell Fatory and to minimise or avoid imports and also to help such undertakings and/or concerns to execute the Government orders. It is contended by the petitioner that even when the factory utilises its surplus resources for the production of non-defence for the purposes indicated hereinbefore, such production and/or distribution and supplies are made in a non-commercial and non-trading manner and not with the purpose of making profit. In support of the said contention, the petitioner has also annexed documents showing pricing of stores manufactured by the said Gun and Shell Factory and other ordnance factories, production of civil goods in different ordnance factories and utilisation of production capacities in ordnance factories. It is contended by the petitioner that the petitioner through the said Cossipore Gun and Shell Factory, does not carry on any business which is liable for sales tax under the said Bengal Finance (Sales Tax) Act, 1941. The petitioner, so far as the activities of the Gun and Shell Factory are concerned, is not a 'dealer' in respect of the aforesaid non-trading and non-commercial activities and the supplies and/or distribution made from the said factory cannot be treated as 'sales' as understood under Section 4 of the Indian Sale of Goods Act and/or the Sales Tax Act and/or the Central Sales Tax Act, 1956. It is, however, contended by the petitioner that in spite of the aforesaid facts, the petitioner was wrongly proceeded with by the Commercial Tax Officer, 24-Parganas Charge, under Section 9(3) of the Central Sales Tax Act, 1956, read with Section 14 of the Bengal Finance (Sales Tax) Act, 1941. The petitioner's representative appeared before the Commercial Tax Officer and on the basis of the discussion the said representative had, the petitioner was of the impression that it would be necessary for the petitioner to get registered as a 'dealer'. Accordingly, the petitioner got registered under Section 7 of the Central Sales Tax Act read with Rule 5(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957, framed under the Central Sales Tax Act, 1956. It is however, contended by the petitioner that although such registration was made by the Commercial Tax Officer, 24-Parganas Charge, it transpired that the said officer had no territorial jurisdiction on the said Gun and Shell Factory and respondent No. 1, viz., the Commercial Tax Officer, Shyambazar Charge, has or had territorial jurisdiction over the said factory. It is contended by the petitioner that although the said registration certificate was issued by the Commercial Tax Officer, 24-Parganas Charge, after calculating and/or fixing liability of the petitioner under Section 6(1) of the Central Sales Tax Act read with Section 4(2) of the Bengal Finance (Sales Tax) Act, 1941, such registration was void and without jurisdiction.

2. It is further contended by the petitioner that prior to the issue of the said registration certificate, the Commercial Tax Officer, 24-Parganas Charge, wrongly fixed the petitioner's liability to pay tax but as aforesaid, the Commercial Tax Officer, 24-Parganas charge, was not vested with power under Section 15 of the Bengal Finance (Sales Tax) Act, 1941, read with Rule 71 of the Bengal Sales Tax Rules, 1941, with the power to fix such liability for payment of tax and/or for registration under the Central Sales Tax Act or under the Bengal Finance (Sales Tax) Act. It is contended by the petitioner that such power remained only with the Commissioner of Commercial Taxes, West Bengal, appointed under Section 3(1) of the Bengal Finance (Sales Tax) Act, 1941. The petitioner further contends that apart from the said question of lack of jurisdiction on the part of the Commercial Tax Officer, 24-Parganas Charge, the commercial tax authorities had also no power to fix any liability on the petitioner to pay sales tax either under the Central Sales Tax Act or under the Bengal Finance (Sales Tax) Act because the petitioner in the matter of production and supplies from the said Gun and Shell Factory had not carried on any business within the meaning of the said Act as the petitioner was not a 'dealer' liable to pay sales tax under the said Acts. It appears that the Commercial Tax Officer, Shyambazar Charge, by his memo dated 30th March, 1962, intimated the General Manager, Cossipore Gun and Shell Factory, that the said registration certificate issued by the Commercial Tax Officer, 24-Parganas Charge, was void ab initio and also directed the petitioner by memo dated 21st May, 1962, to submit fresh application for registration and ultimately a new registration certificate dated 13th September, 1962, was also issued by the said Commercial Tax Officer, Shyambazar Charge. By the said registration certificate, the petitioner was not allowed to purchase any item from places outside West Bengal without payment of Central sales tax or on payment of concessional rate of such tax and the petitioner contends that the said registration certificate was practically useless to the petitioner. The said registration certificate only entitled the petitioner under Section 9A of the Central Sales Tax Act, 1956 and the Rules framed thereunder to collect tax on the inter-State sales of the petitioner. To effect inter-State purchases for the said factory, the petitioner had issued the certificates in form D under Rule 12(1) of the Central Sales Tax (Registration and Turnover) Rules, 1957. It appears that the petitioner by letter dated 26th December, 1963, made a representation to the State of West Bengal, respondent No. 2, requesting to issue necessary orders for waiving the payment of Central sales tax by the petitioner in respect of sales during the pre-registration period from 1st July, 1957, to 12th September, 1962, just as the said respondent No. 2 waived sales tax earlier in respect of similar pre-registration liability of the petitioner under the Bengal Finance (Sales Tax) Act upon similar representation made by the Director General, Ordnance Factories. It is contended by the petitioner that while the said representation for waiver of sales tax was pending with the State Government, the petitioner was served with a notice in form 3 dated 29th October, 1962, purporting to fix the hearing of the assessment case on 15th January, 1964, for the pre-registration period from 6th July, 1957, to 12th September, 1962. The petitioner prayed for adjournments of the hearing of the said case on some occasions explaining the reasons therefor, but respondent No. 1, viz., the Commercial Tax Officer, Shyambazar Charge, rejected the petitioner's prayer for adjournment and directed the representative of the petitioner to appear on 12th March, 1964, but the petitioner's representative could not appear on the said date and by order dated 14th March, 1964, the said respondent No. 1 made an ex parte assessment imposing a huge tax demand of Rs. 33,97,409.66 for the period from 6th July, 1957, to 12th September, 1962 and accordingly the demand notice dated 18th March, 1964, was served on the petitioner. It appears that after the receipt of the said demand notice the petitioner requested the State Government to keep the matter in abeyance till a final directive was received from the Government of West Bengal on the representation already made for waiver of taxes during the pre-registration period. The petitioner was informed by the Commercial Tax Officer, Shyambazar Charge, by letter dated 16th June, 1964, that the said representation for waiving the tax liability had been referred to the higher authority and the decision of such authority would be communicated to the petitioner as soon as the same would be received, but the State Government subsequently by letter dated 23rd June, 1964, informed the petitioner that the said representation of the petitioner to waive the tax liability was not accepted. It appears that thereafter the petitioner moved this Court under Article 226 of the Constitution and a rule being Civil Rule No. 6608(W) of 1969 was issued. The said rule was made absolute in part by this Court and the assessment orders were quashed and the said demand of tax was also quashed. This Court remanded the matter to the Commercial Tax Officer, Shyambazar Charge, with liberty to proceed afresh in the matter in accordance with law. The question of law and/or the mixed question of law and fact, viz., whether or not the activities in the said Gun and Shell Factory were of non-trading and noncommercial nature and whether or not the petitioner had run a business and was a dealer under the said Act was not decided by this Court in the said civil rule. The petitioner contends that as the said basic question, the nature of activity of the petitioner in the said Gun and Shell Factory and the liability of the petitioner to be a dealer under the said Act was not decided, the petitioner preferred an appeal before this Court being F.M.A.T. No. 2458 of 1972 and the same is pending decision. It appears that thereafter assessment orders under Section 9(3) of the Central Sales Tax Act, 1956, for the four periods of assessment ending on 31st March, 1963, 31st March, 1964, 31st March, 1965 and 31st March, 1966, were also made and the petitioner moved four writ petitions under Article 226 of the Constitution before this Court and four civil rules, viz., C.R. Nos. 2171(W), 2402(W), 2404(W) and 2476(W) all of 1972, were issued. The said rules were also pending. The petitioner contends that despite the said dispute being raised by the petitioner before this Court and despite the fact that adjudications by this Court were pending, the Commercial Tax Officer, Shyambazar Charge, served a notice on 16th August, 1967, purporting to start the impugned assessment proceeding under Section 9(3) of the Central Sales Tax Act read with Section 11(1) of the Bengal Finance (Sales Tax) Act, 1941, for the period of 4 quarters ending 31st March, 1968. The said respondent No. 1 thereafter fixed the hearing Of the said case and the petitioner filed a petition of objection contending that the initiation of the said impugned assessment proceeding was unlawful. The said objection petition was, however, rejected by respondent No. 1 inter alia on the ground that no interim injunction was issued by this Court restraining the respondents from initiating any sales tax proceeding. The said respondent No. 1 ultimately passed the impugned assessment order dated 12th February, 1972, imposing a demand of Rs. 71,334.40 for the period of 4 quarters ending 31st March, 1968 and served on the petitioner the impugned notice dated 25th February, 1972, for the said amount. The petitioner thereafter moved the instant writ petition before this Court contending inter alia that the petitioner had not carried on any 'business' as defined under Section l(la) of the Bengal Finance (Sales Tax) Act, 1941 and the petitioner was also not a 'dealer' as defined under Section 2(b) of the said Act and the petitioner did not transact any 'sale' as defined under Section 2(g) of the said Act. The petitioner also contends that whatever tax had been imposed or assessed or realised or collected by the respondents from the petitioner and/or paid by the petitioner consequent upon calculation, finding or fixation of liability, issue of registration certificate and/or the assessment order or demand notice were all made under mistake of law, but the inherent lack of jurisdiction to impose sales tax were not cured by efflux of time and all such actions should be quashed and the respondents should be directed to refund the petitioner the payment already made. It is also contended by petitioner that the respondents have acted in excess or in abuse of their jurisdiction in assuming powers to make the impugned assessment order and to issue the impugned demand and other notices for the said period.

3. During the hearing of the rule, Mr. Debesh Mukherjee, the learned counsel appearing for the petitioner, has informed this Court that on 8th March, 1976, Civil Rules Nos. 2403(W) of 1972 and 2404(W) of 1972 had been disposed of by this Court and against the decision made in the said civil rules, the appeals being F.M.A.T. Nos. 941 and 943 of 1976 are pending decisions. It also appears that another civil rule being C.R. No. 2171(W) of 1972 was also disposed of by this Court on 22nd February, 1977 and an appeal being F.M.A.T. No. 371 of 1977 is now pending adjudication before this Court. Mr. Mukherjee therefore submits that as the very basic question with regard to the nature of transactions carried on by the said factories vis-a-vis the liability under the sales tax laws is pending decision before the appeal court, this Court should either stay the hearing of this rule and/or decide in favour of the petitioner following the decision made in the other civil rules since decided by this Court or refer this rule to a Division Bench for adjudication on the ground that important question of law is involved. The said contention of the learned counsel for the petitioner was seriously opposed by Mr. S. N. Dutt, the learned counsel appearing for the respondents and it is contended by the learned counsel for the respondents that the contentions of the respondents in support of the said impugned order of assessment and demand notice which are intended to be raised in this proceeding had not been decided by this Court earlier and as such it will not be proper either to adjourn the hearing of this rule and/or to refer the matter to the Division Bench. In view of such contentions, the rule has been heard on merits.

4. Mr. Mukherjee, the learned counsel appearing for the petitioner, contends that simply by selling goods, a person does not become a dealer always. He contends that a person who sells goods which are unserviceable or unsuitable for his business does not become a dealer unless he has an intention to carry on the business of selling those goods. A casual sale of unserviceable goods cannot be held to be a business. For this contention, Mr. Mukherjee refers to a decision of the Supreme Court made in the case of State of Gujarat v. Raipur . reported in : [1967]1SCR618 . He also refers to another decision of the Supreme Court made in the case of Director of Supplies & Disposals v. Member, Board of Revenue reported in : [1967]3SCR778 . It has been held in the said decision that ordinarily there must exist the characteristics of volume, frequency, continuity and system indicating an intention to continue the activity of carrying on the transactions for a profit. But no single test or group of tests is decisive of the intention to carry on business and it must be decided in the facts and circumstances of each particular case. In the said decision, the question of liability under the Bengal Finance (Sales Tax) Act on account of disposal of certain goods by the Director of Supplies and Disposals, came for consideration. Mr. Mukherjee refers to another decision of the Supreme Court made in the case of State of Madras v. K.C.P. Limited reported in : [1969]1SCR778 where the liability under the Central Sales Tax Act was under consideration. In the said case, a company was manufacturing and selling machineries and parts of machineries and accessories but some furnaces imported for its foundry were sold as the same were found unsuitable. It has been held by the Supreme Court that the sale proceeds of the said discarded goods found unsuitable cannot be held to be the turnover. Mr. Mukherjee refers to the decision made in the case of Hindustan Steel Ltd. v. State of Orissa reported in : [1972]83ITR26(SC) . The liability under the Orissa Sales Tax Act, 1947, was under consideration in the said case. The company supplied to the contractors for their use, bricks, coal, cement, steel, etc., for a consideration which in addition to the cost price of the articles supplied included some additional amount and the question arose whether the supply of the said building materials for erection of the factory by the contractors was sale or not. It has been held in the said decision that the supply constituted sale, but if the company had charged a fixed percentage above its cost price only for storage, insurance, rental and other incidental charges, it cannot be held that the company was carrying on business of supplying materials and it will not be a 'dealer'. In this connection, Mr. Mukherjee has also referred to another decision of the Supreme Court made in the case of District Controller of Stores, Northern Railway v. Assistant Commercial Taxation Officer reported in : AIR1976SC489 . The liability of tax after the amendment of the definition of 'business' with retrospective effect under the Rajasthan Sales Tax Act was under consideration in the said case. It has been held that selling of unserviceable materials and scraps will be business within Clause (i) of the definition of 'business' as amended. Even if it is assumed that the activity involved in selling the said scraps and unserviceable materials will not amount to business in the normal connotation of that term, the same will be business under the amended definition. Mr. Mukherjee contends that the said decision is confined to the special facts of the said case and under the special definition of 'business' as amended with retrospective effect. He also submits that if there is any contradiction in the two decisions of the Supreme Court, without considering the other Judgment, the view, expressed by the larger Bench is to be preferred and for this contention, Mr. Mukherjee refers to a decision of the Supreme Court made in the case of Mattulal v. Radhe Lal reported in : [1975]1SCR127 . Mr. Mukherjee also refers to a decision made in the case of Joint Director of Food, Visakhapatnam v. State of Andhra Pradesh reported in : [1977]1SCR59 . It has been held that under the definition of 'dealer' in Section 2(b) of the Central Sales Tax Act, 1956, a person becomes a dealer only if he carries on a business, but the ordinary concept of business has the element of gain or profit, whose absence negatives the character of the activity as business. However, under the Andhra Pradesh General Sales Tax Act, 1957, a person becomes a dealer even if there is no profit-motive or profit accrual. Mr. Mukherjee contends that under Section 3(1) of the Bengal Finance (Sales Tax) Act, 1941, the Commissioner of Commercial Taxes has been made the taxing authority and Section 15 has authorised the Commissioner to delegate his powers and such delegation has been made under Rule 71 of the Bengal Sales Tax Rules, 1941. He contends that there is no provision in the Bengal Act which authorises the Commercial Tax Officer to fix and determine the liability to pay tax independent of and prior to an assessment which is made under the Act. Neither the Central Sales Tax Act, 1956, nor the Bengal Finance (Sales Tax) Act, 1941, envisages a proceeding for determination of such liability which is ipso jure and ex hypothesi arises by reason of charging section. For this contention, Mr. Mukherjee refers to a decision of this Court made in the case of Sri Surajmal Jain v. Commercial Tax Officer reported in [1973] 32 STC 601. He also refers to another decision of this Court made in the case of Sudhir Chandra Mukherjee v. Additional Commissioner, Commercial Taxes reported in [1976] 37 STC 554. It has been held in the said decision that Section 4 of the Bengal Finance (Sales Tax) Act is only a charging section but it does not contemplate fixation or determination of the date of commencement of liability. Such a thing can only be made in a proceeding as envisaged in Section 11(2) of the Act. He also refers to the decision made in Civil Rule No. 2404(W) of 1972 (Union of India through the General Manager, Gun & Shell Factory v. Commercial Tax Officer, Shyambazar). It has been held by Sabyasachi Mukharji, J., in the said decision that assessment based on determination of liability under Section 4(2) of the Act was done without proper authority of the Commercial Tax Officer and under Rule 71 of the Bengal Sales Tax Rules such a delegation cannot be made. Mr. Mukherjee submits that the said view of Sabyasachi Mukharji, J., has also been accepted by Chittatosh Mookerjee, J., in disposing of Civil Rule No. 2171(W) of 1972 (Union of India through the General Manager, Gun & Shell Factory, Cossifrore v. Commercial Tax Officer). Mr. Mukherjee also refers to another decision of this Court made in the case of Debendra Chandra Das v. Commercial Tax Officer, Coochbehar reported in [1978] 42 STC 458. It has been held by C.K. Banerji, J., that Section 4 is a mere charging section and no determination of liability to pay tax from a certain date under Section 4(2) can be made independently and prior to the initiation of the proceeding under Section 11(2). He, therefore, submits that for the same reasonings the fixing of liability of sales tax by the Commercial Tax Officer, Shyambazar Charge, is illegal and cannot be cured by the delegation of power under Rule 71 of the Bengal Sales Tax Rules. Mr. Mukherjee submits that in the decisions made by Sabyasachi Mukharji, J. and Chittatosh Mookerjee, J., in Civil Rule Nos. 2404(W) of 1972 and 2171(W) of 1972, similar'contentions were raised by the very same petitioner in respect of the assessment orders for other periods for the transaction made in the Cossipore Gun and Shell Factory and the decisions were made in favour of the petitioner. Mr. Mukherjee submits that the said decisions should also be followed by this Court and the rule should be made absolute. Mr. Mukherjee submits that if the assessment is void, it is not necessary to set aside the void assessment and no period of limitation is prescribed for claiming a refund on account of payment made consequent upon a void assessment. For this contention, Mr. Mukherjee refers to a Bench decision of this Court made in the case of State of West Bengal v. Suresh Chandra Bose reported in 84 CWN 229. Mr. Mukherjee also contends that if tax was collected from purchasers when such collection was not authorised by the Act, such collection must be held to be illegal and a party making payment on account of such illegal imposition of tax must get refund of the illegal payment. Mr. Mukherjee also contends that if on a mistaken concept of law and fact the petitioner had applied for registration and had got registered under the Sales Tax Act and had paid sales tax although the imposition of sales tax was illegal and void, the petitioner cannot be precluded from denying its liability simply because on earlier occasion the payment of tax was made on misconception of fact and law. For this contention Mr. Mukherjee refers to a decision of the Supreme Court made in the case of Doma Sao Mohanlal v. State of Bihar reported in [1971] 27 STC 472 (SC). It has been held in the said decision that earlier adjudication of the High Court on a writ petition in relation to a previous assessment year cannot be relied on in relation to the recovery proceedings for a subsequent period as each assessment period is distinct and any decision of the authorities declaring liability to tax for earlier period cannot operate res judicata in respect of another period. Mr. Mukherjee also refers to a Bench Decision of the Mysore High Court made in the case of Nasefalli Oil Mills v. State of Mysore reported in [1973] 32 STC 599. It has been held in the said decision that if an assessee makes a mistake in submitting a return and submits to be assessed to tax before the assessing authority, he is not estopped or precluded by any law from preferring an appeal and showing to the appellate authority that sales, are, in fact, not exigible to tax. There is no question of invoking the doctrine of estoppel in such a case.

5. Mr. S. N. Dutt, the learned counsel appearing for the respondents, however, submits that in the assessment in question, sales to Government departments have been excluded because such sales do not constitute a business dealing but the sales made to private sectors have been taken into account and the assessment order has been passed in respect of sales made to private sectors. It is contended by Mr. Dutt that the petitioner has been carrying on business of selling goods manufactured in the Gun and Shell Factory, Cossipore, to various private concerns and there are usual elements of trading activity in such transactions. It is immaterial whether the said sale or transaction was made for any laudable purpose. He submits that motive is irrelevant and if normal trading activities are carried on for the purpose of manufacture of the goods in question and sale has been effected in the regular course of business, then the petitioner must be held to be a dealer within the meaning of the Central Sales Tax Act. He also submits that the petitioner got itself registered and has also paid sales tax not under any misconception of law or fact as alleged but only after understanding its liability to pay sales tax, the petitioner got registered and had paid sales tax. He also contends that in the instant rule, the petitioner has raised a dispute as to the jurisdiction of the State Government to realise sales tax from the petitioner, namely, the Union of India, but such a dispute between the State Government and the Central Government cannot be decided by this Court under Article 131 of the Constitution and only the Supreme Court can decide such dispute. Mr. Dutt contends that under Section 2(b) of the Central Sales Tax Act, 1956, a 'dealer' means any person who carries on the business of buying or selling goods and includes the Government which carries on such business. He submits that profit-motive is not essential to constitute a business and for this contention, he refers to a decision made in the case of State of Andhra Pradesh v. H. Abdul Bakshi reported in : [1964]7SCR664 . It has been held in the said decision that business in taxing statutes is used in the sense of an occupation or profession which occupies the time, attention and labour of a person, normally with the object of making profit. Mere buying for personal consumption without profit-motive will not make a person dealer. He also refers to another decision of the Supreme Court made in the case of Narain Swadeshi Weaving Mills v. Commissioner of Excess Profit Tax reported in : [1954]26ITR765(SC) . It has been held in the said case that business as defined in the Excess Profit Tax Act is the same as business in Section 2(4) of the Income-tax Act for the word 'business' connotes some real, substantial, systematic or organised case of activity or conduct with purpose. He also refers to a decision of the Supreme Court made in the case of State of Gujarat v. Raipur . reported in : [1967]1SCR618 . The Supreme Court in the said decision has highlighted the volume, frequency, continuity and regularity of transactions with profit-motive as elements of business. Mr. Dutt submits that the consideration which prompted the Central Government to manufacture certain goods in the Cossipore Gun and Shell Factory and other Ordnance Factories for the sale and supply to private concerns is not at all material. That remains in the domain of public policy but in the matter of transaction in question to private sector, all elements of business viz., volume, frequency, continuity, regularity, etc., are present. Accordingly, the said transaction conforms to the definition of 'sale'. For the said contention, he also refers to the decision of the Supreme Court made in case of Director of Supplies and Disposals v. Member, Board of Revenue reported in : [1967]3SCR778 . Mr. Dutt submits that the Ordnance Factories are admittedly engaged in producing materials meant for civil consumption, such production is not made all on a sudden but the production is made systematically with a scheme. Hence, the petitioner must be held to be a dealer within the meaning of the Act for the transaction in question. In this connection, Mr. Dutt refers to a decision of the Madras High Court made in the case of L. N. Plantation Company v. State of Tamil Nadu reported in [1981] 47 STC 210. In the said case, the registered dealer intended to raise plantation crops after clearing the area of forest growth. After clearing the trees from the forest growth, the said trees were sent to saw mills and logs were made into suitable sizes and sold the sized logs to consumer. Though the ultimate object of the dealer was to grow coffee or tea the motive to do business in timber, etc., was clearly discernible. Hence, under the Tamil Nadu General Sales Tax Act, the dealer was liable to pay sales tax. Mr. Dutt submits that dictionary meaning of the expression 'profit' is gain, benefit or advantage. Hence, there is no manner of doubt that for some gain or advantage which may not be always monetary advantage, the Central Government decided to manufacture certain goods for use of the private consumers and had also sold the same to the private consumers. Hence, the transaction made to such private consumers must be held to be sales. Mr. Dutt contends that Section 4 of the Bengal Finance (Sales Tax) Act has no bearing on Section 6 of the Central Sales Tax Act. The said Section 6 is an independent Section and the liability under the Central Sales Tax Act is also not dependent on the provisions of the Bengal Finance (Sales Tax) Act. He, therefore, submits that the decisions relied on by Mr. Mukherjee are not attracted to the facts of the instant case. Mr. Dutt also refers to a Bench decision of the Punjab and Haryana High Court made in the case of Government Medical Stores Depot v. State of Haryana reported in [1977] 39 STC 114. In that case, the Government Medical Stores Depot was supplying medicines to Government hospitals and medical institutions and for such supply only 10 per cent cost was added as service charge, but no other profit was made. It was held that the said depot was a dealer under the Central Sales Tax Act and thePunjab General Sales Tax Act and the Haryana General Sales Tax Act. Mr. Dutt contends that as the dispute has been raised by the Union of India as to the imposition of sales tax on it, decision of such dispute by the High Court is barred by Article 131 of the Constitution and for this contention, he refers to a decision of the Punjab and Haryana High Court made in the case of Government Medical Store Depot, Karnal v. State of Haryana reported in [1972] 29 STC 7. So far as the competency of the Commercial Tax Officer is concerned, Mr. Dutt submits that under the Central Sales Tax Act the charging section is Section 6, but the provisions of Section 4(2) of the Bengal Finance (Sales Tax) Act are attracted because the liability of sales tax comes in on fulfilling certain conditions and as such it is necessary to make such factual determination for holding a dealer liable to sales tax. Section 9 of the Central Sales Tax Act authorises the authority under the Bengal Finance (Sales Tax) Act to assess tax. Hence Section 6 read with Section 9 of the Central Sales Tax Act read with Section 11 of the Bengal Finance (Sales Tax) Act authorises the Commercial Tax Officer to assess tax. Mr. Dutt submits that under Section 11 of the Bengal Finance (Sales Tax) Act, the Commercial Tax Officer is authorised to impose tax and it is nobody's case that the said officer is not so authorised. Hence, no illegality has been committed by the Commercial Tax Officer in making the impugned assessment and he has also not acted in excess of his jurisdiction. Mr. Dutt also contends that the writ petition has been made after six years and no appeal has also been preferred by the petitioner against the said assessment order. He submits that there is a clear provision for preferring an appeal if the assessee is dissatisfied by an order of assessment and the constitutional writ jurisdiction is not intended to' be invoked for the purpose of by-passing the local Act. Mr. Dutt also contends that the petitioner could clearly pursue other effective remedies under the taxing statute for the relief prayed for but the petitioner allowed the assessment to be final without pursuing the remedy. The petitioner had also the right to sue for recovery on payment of court-fees. In such circumstances the long delay in presenting the instant writ petition must be held to be a dissuading factor. For this contention, Mr. Dutt refers to a Bench decision of the Madras High Court made in the case of M. Mohamed Salam v. Commissioner of Commercial Taxes reported in [1970] 26 STC 163. In this connection, Mr. Dutt refers to two decisions of the Supreme Court made in the case of Swadeshi Cotton Mills Co. Ltd. v. Government of Uttar Pradesh reported in : (1975)4SCC378 and State of Madhya Pradesh v. Bhailal Bhai reported in : [1964]6SCR261 . In Swadeshi Cotton Mills' case : (1975)4SCC378 the Supreme Court has observed that every one is deemed to know the law and ignorance of law is no excuse. A writ petition filed in 1956 challenging the validity of an assessment made in 1949 and praying for refund of the tax, illegally collected after the decision of the Supreme Court (sic) in Modi Food Products Ltd.'s case reported in [1955] 6 STC 287 on the allegation that after the said decision of the Supreme Court the petitioner came to know about the correct legal position. The said contention was not entertained by the High Court on the ground of delay. The Supreme Court has held that the High Court was justified in not entertaining the writ petition. It has also been observed by the Supreme Court that apart from delay, the petitioner had adequate alternative remedy by way of going up in appeal and the petitioner, not having availed such remedy, should not be permitted to invoke the extraordinary jurisdiction of the High Court under Article 226. In Bhailal Bhai's case : [1964]6SCR261 , the Supreme Court has held that where a person comes to the court for relief under Article 226 on the allegation that he has been assessed under a void legislation and having paid it under a mistake is entitled to get it back and the court finds that the assessment was void being made under a void provision of law and the payment was made through mistake, it will still not be bound to order for repayment. Exercise of discretion will depend on the facts of each case. As a general rule it may be stated that if there is unreasonable delay the court ought not ordinarily to lend its aid to a party by its extraordinary remedy of mandamus. Again, where even if there is no such delay the Government or the statutory authority against whom the constitutional relief is prayed for raises a prima facie triable issue as regards the availability of such relief on the merits on the grounds like limitation, the court should ordinarily refuse to issue the writ of mandamus. It has also been observed by the Supreme Court that the maximum period fixed by the legislature as the time within which the relief by a suit in a civil court must be brought may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Article 226 can be measured. The court may consider the delay unreasonable even if it is less than the period of limitation prescribed for a civil action but where the delay is more than the period, it will always be proper for the court to hold that it is unreasonable.

6. Mr. Mukherjee, the learned counsel for the petitioner, in reply to the contentions made by Mr. Dutt, has submitted that the dispute in the instant case is not a dispute challenging the State's authority to impose sales tax on any Central Government department even when such department is carrying on business and trading activity. The dispute in the instant case is on the factual aspect of the dealings in question. Hence the same is not a dispute qua the Union Government. In this connection, Mr. Mukherjee refers to a Bench decision of the Mysore High Court made in the case of State of Mysore by General Manager, Mysore Implements Factory v. Union of India reported in AIR 1968 Mys 237. It has been held in the said decision that when the State Government files writ petition challenging the order of the Central Government the jurisdiction of the High Court to issue writs in favour of the State Government is not excluded by Article 131. A dispute falls within Article 131 of the Constitution only when the Central Government is a disputant as such. The dispute must arise directly between the State and the Central Government as repository of the executive power of the Union. An indirect interest in the collection of the revenue in the form of excise duty if such duty is claimed by the Central Government under the Excise Act is far too slender to postulate a controversy under Article 131. Mr. Mukherjee has also referred to a decision of the Supreme Court made in the case of State of Bihar v. Union of India reported in : [1970]2SCR522 . It has been held by the Supreme Court in the said decision that the expression 'State' has the same meaning in Part IV of the Constitution. The enlarged definition of 'State' given in Parts III and IV of the Constitution will not be attracted in Article 131. Mr. Mukherjee has also referred to the decision of this Court made in the case of Union of India through the General Manager, Gun and Shell Factory v. Commercial Tax Officer, Shyambazar Charge, reported in 1976 (9) STC 17. The said decision was made by this Court in connection with a different assessment period relating to the transaction made by the Gun and Shell Factory, Cossipore. Sabyasachi Mukharji, J., has held in the said decision that Article 131 is attracted in a dispute which is dependent on the right of the Government of India qua Government of India or the right of the States qua States and not in the instant case where the dispute does not involve any question as to whether the Government of India as such can be taxed under the provisions of the Bengal Finance (Sales Tax) Act, but merely where transactions were such which were liable to be covered by the provisions of the said Act. In my view, the aforesaid contention of Mr. Mukherjee is justified and I am inclined to accept the same. The Central Government in the instant case is not a disputant qua Central Government and dispute does not arise directly between the State and the Central Government as repository of the executive power. I respectfully agree with the view taken by the Division Bench of the Mysore High Court in the case of State of Mysore v. Union of India reported in AIR 1968 Mys 237 wherein it has been held that an indirect interest in the collection of the revenue under a State if claimed by the Government is far too slender to postulate a controversy under Article 131. Sabyasachi Mukharji, J., has held in a similar dispute relating to a different period that in the facts of the case Article 131 is not attracted because the dispute is not dependent on the right of the Government of India qua Government of India. Accordingly, the writ petition is not barred under the provisions of. Article 131 of the Constitution. Mr. Mukherjee has next contended that there must be a distinction between a void assessment and illegal assessment and claim of refund even after three years from knowledge may be entertained in proper places in the writ proceeding and in support of this contention, he refers to a Bench decision of this Court made in the case of State of West Bengal v. Suresh Chandra Bose reported in 84 CWN 229. He also refers to a decision made in the case of Burmah Construction Company v. State of Orissa reported in : AIR1962SC1320 . Relying on the decision in Gannon Dunkerley & Co.'s case : [1959]1SCR379 that works contracts are not assessable for sales tax, a writ petition was made by the Burmah Construction Co. for refund of tax paid on mistaken belief in law and the High Court allowed the said claim of refund made under Article 226. It was held by the Supreme Court in the said decision in Burmah Construction Co.'s case : AIR1962SC1320 that the appellant was entitled for enforcement of the liability of the Collector imposed by the statute to refund tax illegally collected subject to restriction imposed by the legislature and the appellant was entitled to refund of that part of the sales tax if the order of assessment imposing tax liability for sales tax was within 24 months from the date when the petition was filed.

7. Mr. Mukherjee submits that by the Central Sales Tax (Amendment) Act, 1976, the definition of 'business' has been amended and after the amendment, any trading activity if carried no even without profit-motive will be a 'business'. He submits that the very amendment suggests that prior to the amendment profit-motive was understood to be a governing factor to make an activity a 'business'. In this connection, he refers to a decision of the Supreme Court made in the case of the Joint Director of Food v. State of Andhra Pradesh reported in : [1977]1SCR59 . It has been held in the said decision that under the Central Sales Tax Act, a person will be a dealer only if there is a profit-motive in his activities. He submits that occasional dealing with some articles which is not a normal course of activities does not constitute such dealing as a trading activity. To constitute a trading activity there must be a dominant object of of making profit and the same must arise from an adventure in the nature of trade. For this contention, he refers to a decision of the Allahabad High Court made in the case of Lalit Ram Mangilal v. Commissioner of Income-tax reported in : [1950]18ITR286(All) . The occasional trading with gold bar by a cloth merchant was not held to be a business activity by the said merchant. Mr. Mukherjee submits that the Orissa High Court held a similar view that under the Central Sales Tax Act profit-motive is an essential ingredient to constitute a course of dealing as a 'business' and he refers to the decision of the Orissa High Court made in the case of State of Orissa v. Divisional Forest Officer reported in [1973] 32 STC 487 .

8. After considering the respective submissions of the learned counsels appearing for the parties, it appears to me. that the impugned orders of assessment and consequential demand notice have been challenged on two main grounds, namely, the order of assessment has been made by an authority not vested with such power and the transaction in question did not attract any liability of tax under the Central Sales Tax Act. It has been contended by the petitioner that the Commercial Tax Officer had no jurisdiction for assessing under the Central Sales Tax Act. It is contended by Mr. Mukherjee that there is no provision in the Bengal Act which authorises the Commercial Tax Officer to fix and determine the liability to pay tax independent of and prior to an assessment which is made under the Act. He also contends that neither the Central Sales Tax Act nor the Bengal Finance (Sales Tax) Act envisages a proceeding for determination of such liability which ipso jure and ex hypothesi arises by reason of charging section. For this contention, reference was made on the decision made by this Court in Surajmal Jain's case reported in [1973] 32 STC 601. It may also be noted in this connection that in respect of another period, the petitioner also moved a writ petition challenging the assessment of sales tax on transactions made by the General Manager, Cossipore Gun and Shell Factory, in Civil Rule No. 2404(W) of 1972. The said rule was disposed of on 5th March, 1976 and Sabyasachi Mukharji, J., held that assessment based on determination of liability under Section 4(2) of the Act was done without proper authority of the Commercial Tax Officer. Under Rule 71 of the Rules framed under the said Bengal Act, such delegation cannot be made. It also appears that in another rule relating to another period, the General Manager, Cossipore Gun and Shell Factory, representing Union of India also moved a writ petition whereupon Civil Rule No. 18275(W) of 1975 was issued. The said rule was also disposed of on 6th September, 1979 and was made absolute accepting the view as expressed by Sabyasachi Mukharji, J., in Civil Rule No. 2402(W) of 1972. The Division Bench of this Court in Sudhir Chandra Mukherjee's case [1976] 37 STC 554 has also decided that Section 4 of the Bengal Finance (Sales Tax) Act is only a charging section but does not contemplate fixation or determination of the date of commencement of liability. Such thing can be done only in a proceeding as envisaged in Section 11(2) of the Act. Similar view has also been expressed by this Court in the decision made in the case of Debendra Chandra Das v. Commercial Tax Officer reported in [1978] 42 STC 458. In the aforesaid circumstances, there is no doubt that Mr. Mukherjee's contentions get amply supported and I am inclined to accept the same. I respectfully agree with the view expressed by D. Pal, J., in Surajmal Jain's case [1973] 32 STC 601 that neither the Central Sales Tax Act nor the Bengal Act envisages a proceeding for determination of such liability which ipso jure and ex hypothesi arises by reason of charging section. As aforesaid, Sabyasachi Mukharji, J., has also held that under Rule 71 of the Rules, delegation of the authority of the Commissioner cannot be made to the Commercial Tax Officer. Hence, assessment of tax even under the Central Act by the Commercial Tax Officer does not appear to be valid. So far as the nature of the disputed transaction is concerned, it appears to me that prior to the amendment of the Central Sales Tax Act, profit-motive was an essential element for making a transaction a business dealing. In my view, the nature of transactions reveals that for the proper utilisation of surplus potentiality of the defence factories of the Government of India including the Gun and Shell Factory at Cossipore, certain productions were made at slack season for meeting the exigencies of the production requirement of the country and supply of some materials produced by the defence factories including the Gun and Shell Factory at Cossipore were made to selected manufacturers so that they may fulfil the contracts of the Central Government and/or the State Government and/or the Government companies and also fulfil the development programme of the country. It does not appear that really with any profit-motive and to constitute a regular business dealing, such productions were made. Accordingly, in any event, the transactions in question could not be the subject-matter of tax under the existing Central Sales Tax Act. Hence, even assuming that the Commercial Tax Officer had jurisdiction to assess the tax under the Central Act, in the facts of the case, no tax could be imposed at the relevant time. Although the learned counsel for the petitioner has argued that payment of tax made by the petitioner on mistaken view of law and fact should be directed to be refunded, there is no such specific prayer in the writ petition. That apart, in my view, Mr. Dutt is justified in his contention that even if an assessment is void and payment was made through mistkae, the writ court is not bound to order for repayment and exercise of discretion will depend upon the facts of each case as laid down by the Supreme Court in Bhailal Bhai's case : [1964]6SCR261 . The Supreme Court in that case has specifically laid down that the maximum period fixed by the legislature as the time within which the relief by suit in a civil court must be brought, may ordinarily be taken to be a reasonable standard by which delay in seeking remedy under Article 226 of the Constitution can be measured. The court may consider the delay unreasonable even if it is less than the period of limitation prescribed for a civil action but where the delay is more than that period, it will almost always be proper for the court to hold that it is unreasonable. Hence, in any event, for the payments made long back and for which the relief in a civil court has become barred, should not be allowed by the writ court even if such oral prayer is made.

9. In the circumstances aforesaid, the instant rule succeeds and is made absolute. But I make no order as to costs.

10. Mr. has prayed for stay of the operation of the Judgment. Let the operation of the Judgment be stayed for a period of two weeks from today.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //